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One thing I must say for resource companies is to really know what kind of assets (especially land) they have. A real smart entreprise have access to significant pieces of valuable land and use them at the right time (when the villagers have vacated the land for 5 years at least and no one know why it was purchased in the first place - they typically use BOT schemes or agent companies to do it without showing who is the real owner).

Another topic is debt. Sometimes I ask myself whether debt really an issue for extremely well-connected big companies. Olam is much more leveraged than Wilmar. However, as they are supported by our large soverign funds and have significant strategic interest our country, would they ever allow Olam to default? Somehow, in times of crisis, these companies will be able to survive by some form refinancing or arrangement.

Look at the last line - I ask myself, do I dare to invest in this business when I don't even know if LUCK will bring in profits??

*For the full article, please visit the website.

The Straits Times
www.straitstimes.com
Published on Aug 16, 2012
Companies
Wilmar 'needs a dose of good luck'
Stock falls to three-year low but chief upbeat on prospects

By Goh Eng Yeow Senior Correspondent

COMMODITIES trader Wilmar International looks like it needs a decent dose of good luck to put its woeful performance behind it.

Indeed, the word "luck" popped up several times during an hour-long briefing provided by boss Kuok Khoon Hong yesterday.

He was peppered with questions over the firm's problematic oilseed and grain division, which has dragged down profitability.

Mr Kuok said that even though Wilmar's second-quarter profits fell an eye-popping 70.2 per cent to just US$117.1 million (S$145 million), he still regards it as "reasonably respectable" when seen against the firm's performance in the past decade.

In 2005, for instance, the year before it was listed, Wilmar had made a full-year profit of only US$40 million, he noted.

This is not a view shared by jittery investors, who voted with their feet yesterday, sending Wilmar's share price tumbling 24 cents, or 7.1 per cent, to a new three-year low of $3.15 on a heavy volume of 48.6 million shares.

Including yesterday's loss, Wilmar has slumped 37 per cent since January and lost $11.85 billion in market value.

Mr Kuok stayed optimistic about the prospects of the volatile oilseed and grain division, which buys soya beans and crushes them into end products such as soya bean meals and oil products.

This was despite the worries repeatedly flagged by analysts over the wild swings in the division's profitability - losing US$53 million in the first quarter and another US$40 million in the second quarter, after making US$423 million last year - which made it difficult to predict Wilmar's earnings.

Mr Kuok said: "We started in 1991 with a few million dollars, just running a refinery and trading palm oil. Later on, we went into crushing. It is a very volatile business. But we are reasonably good at it, and it was from there that we built the company into what it is today.

"Of course, luck runs out one day. That is why we kept reinvesting our profits into brick-and-mortar plantation businesses building big refineries and consumer type businesses with stable profits."

He also flagged the challenge faced by Wilmar in its largest market, China, from the state-owned companies eyeing a bigger slice of the edible oil market. But he expressed confidence that the subsidies needed to capture market share may prove to be a deterrent.

He also noted that it would be difficult for Wilmar to dodge wild swings in its earnings, given the nature of the volatile commodities trading business it is in.

"The beauty of this business is that even though I lose money this quarter, I can make a lot of money in the next quarter, if I judge the market correctly, since it is volatile," he said.
----------------------------

If a business depends on luck, how could the business thrive?

Is the management of Wilmar a bit complacent?

Did Peter Lim Sell out? How come Tatler siad Peter Lim sold his stakes in Wilmar?

(16-08-2012, 09:21 AM)propertyinvestor Wrote: [ -> ]Did Peter Lim Sell out? How come Tatler siad Peter Lim sold his stakes in Wilmar?

check this:

http://www.forbes.com/lists/2011/79/sing..._ZDP1.html

*For the full article, please visit the website.

The Straits Times
www.straitstimes.com
Published on Aug 28, 2012
Wilmar 'needs acquisition' to reverse stock decline

HONG KONG - Wilmar International needs an acquisition to reduce its dependence on a money-losing, oilseed-crushing business in China as the company trades at a 65 per cent discount to sales.

Profit at the largest importer of soya beans into China fell 52 per cent in the first half of the year as the unit that turns the beans into oil and animal feed reported a loss.

The most severe drought in half a century in the United States now threatens the business further by driving up soya bean prices. Down 36 per cent this year, the mainboard-listed stock is the worst performer in the benchmark Straits Times Index and is trading at its lowest price-to-sales multiple since 2008, according to data compiled by Bloomberg.

After it attempted to buy Goodman Fielder and considered a bid for Gavilon Group this year, Wilmar could reverse its stock decline by acquiring a firm that lessens its reliance on China, according to PhillipCapital.

Australia's GrainCorp would give Wilmar a business in food commodity trading, said Emerald Group Australia, while purchasing Brazilian sugar operations would give it a foothold in the largest sugar-producing country, said Nomura Holdings.

"They should be making acquisitions," Mr James Koh, a Singapore-based analyst at Maybank Kim Eng Holdings, said in a telephone interview.

"It's better for them to diversify their portfolio in terms of their product offering. Any sort of diversification should be good for them."

"We will only consider M&A opportunities which have synergies with our existing operations," the company wrote in an e-mailed statement.

Wilmar has a capital expenditure target of under US$1 billion (S$1.25 billion) for this year, "unless we see very compelling targets for M&A", chief executive officer Kuok Khoon Hong said at a recent media briefing.

Mr Kuok is the nephew of Malaysian billionaire Robert Kuok, who controls about 28 per cent of Wilmar, data compiled by Bloomberg shows.

China is home to 50 of the 54 plants owned by Wilmar and its subsidiaries, used to crush soya beans and other so-called oilseeds into meal used in animal food and cooking oil, according to the company's annual report last year.

Yet, Wilmar's oilseeds and grains division swung to a US$92.5 million loss in the first half of this year, from a US$321.5 million profit the year before, data from Wilmar shows. Crushing margins in the second quarter were the worst in a decade, Mr Kuok, the CEO, said earlier this month.

The business began suffering after government-backed companies in China added more oil-crushing capacity than the country needs, an excess that will take several years to disappear, Macquarie Group analysts wrote in a report dated last week.

Since 2006, Wilmar's sales in China have risen more than fivefold to about US$21.7 billion last year, according to data compiled by Bloomberg.

The country where Wilmar produces packaged cooking oil and mills rice and flour accounts for almost half of its US$44.7 billion in annual revenue.

"Given their focus is on China, it would be better for them to diversify to other regions, other emerging markets," said Mr Nicholas Ong, an analyst at PhillipCapital in Singapore. "Acquisitions will definitely help, being a catalyst to their stock price."

The stock was valued last Friday at 0.35 time sales, a level not seen since December 2008. That compares with an average multiple of 1.7 times for 47 food manufacturers and agricultural product wholesalers with a market value higher than US$5 billion.
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The Straits Times
www.straitstimes.com
Published on Jan 08, 2013
COMPANIES
Wilmar may continue its slump

HONG KONG - Wilmar International, the worst performing stock on the Straits Times Index (STI) last year, may extend its slide this year as investors favour agricultural companies that rely less on trading.

Wilmar, the world's largest palm oil processor, lost 33 per cent last year - its third annual drop in a row - as profit missed analysts' estimates in three of the four quarterly reports issued during the year.

The company's stock may fall 6.1 per cent, based on the average of 21 analysts' 12-month target prices compiled by Bloomberg. The company slumped as commodities, including palm oil and sugar, declined last year.

The questioning of Olam International's accounts by short-seller Carson Block's Muddy Waters made some wary of buying into agricultural companies, even as a growing global population fuels demand for food.

Some investors and analysts have highlighted that producers engaging in trading activities potentially carry more risk.

"The concept of agriculture and food resources is absolutely a valid concept," said Mr Hugh Young, who helps manage about US$70 billion (S$86 billion) of Asian equities at Aberdeen Asset Management Asia in Singapore and does not hold Wilmar or Olam.

"Some are trading companies with which we feel naturally a little uncomfortable because the trades can go both ways," he said.

Wilmar's slide compares with a 20 per cent gain for the benchmark STI last year.

Olam, which was targeted by Mr Block in November, lost 27 per cent last year, its second straight yearly loss and the second-worst performance on Singapore's main index.

Wilmar and Olam, both based in Singapore, declined to comment on their share-price performance.

Analysts have a 12-month price target of $3.38 on average, on Wilmar. Seven analysts recommend selling Wilmar stock, nine advise buying it and 11 rate it "hold".

Profit at Wilmar may have shrunk 31 per cent to US$1.1 billion in the year ended Dec 31, the lowest since 2007, according to 21 analyst estimates compiled by Bloomberg.

The company may post net income of US$1.35 billion this year, still 16 per cent lower than that of 2011, according to the average of 21 analyst estimates compiled by Bloomberg.

DBS Group Holdings analyst Ben Santoso said he still expects a weak contribution this year from Wilmar's oilseeds unit - which processes soybeans into meal and oil - after it posted losses in the first half of last year. The loss was partly blamed on bad timing of bean purchases.

Margins on processing soybeans, known as crushing, will probably "return to positive territory but it's not going to be a major driver", said Mr Santoso, who is based in Singapore. Overcapacity in the industry will continue to affect the unit's profitability, he added.

Olam, the world's second-largest rice trader, may struggle to shed concerns about its accounts and strategy raised by Mr Block and his research firm Muddy Waters. The commodity trader said last week that it is in the best financial health since its 2005 initial public offering and is "comfortable" with its debt.

Mr Carey Wong, a senior analyst at OCBC Investment Research, said in a Dec 12 report: "Besides the still gloomy economic outlook, investors' appetite toward commodities-related players - especially those with complex business models - is also likely to remain lukewarm in the wake of the recent saga involving Olam and Muddy Waters."

Demand for agricultural commodities may be supported by a rebound in China, the biggest consumer of soybeans, which is poised to snap a seven-quarter slowdown as growth probably accelerated to 7.8 per cent in the three months ended Dec 31, according to the median of 35 economist estimates compiled by Bloomberg.

Aberdeen's Mr Young said he prefers pure producers such as United Malacca and United Plantations, which are both traded in Kuala Lumpur.

"We prefer simpler, more plain-vanilla-type companies."

United Malacca gained 5.4 per cent last year and United Plantations advanced 32 per cent in Kuala Lumpur trading.

"The plantation companies we like have an area with ground, with trees, and they produce palm oil," he said. "It's quite tangible. Land assets, land rights are very visible."

Singapore-based Golden Agri-Resources, the world's second-biggest palm oil producer, declined 9.1 per cent last year. That made it the third-worst performer in Singapore, yet it out-performed Wilmar and Olam.

The stock has dropped amid a 23 per cent retreat in palm oil, as customers cut orders and inventories piled up.

"It is hard to be really bullish on the sector at the moment," said Ms Julie Tay, an investment manager at Scottish Investment Trust, which oversees about US$1 billion in assets. "The positive and negative factors for palm oil look quite balanced in the near term."

BLOOMBERG

this one really worst performer for 2012
see 2013 they can come back or not

as more and more people hate or dislike Wilmar, I am liking it better and better. two unfavorable often cited for Wilmar.

1. The oil seed crushing business in China sucks. No doubt, the oil seed crushing business in China is crowded, with more domestic capacity coming online. Wilmar is wise(at the same time not able to) not to increase crushing volume in China. On the one hand, it means lower feed price for its consumer pack edible oil product; on the other hand, it means, Wilmar could have a good chance to buy those newly added crushing capacity later when those new players get squeezed by higher soybean feed price and lower crude soyoil price, a possible repeat of what happened in 2002 - 2005 in China when Wilmar acquired significant crushing capacity when domestic players were squeezed by low soybean price.

2. The lower palm oil price. Is lower palm oil price really that bad for Wilmar? I don't think so. The own production of Wilmar is very little compared to what Wilmar trades. (latest 3Q2012, sale volume of Palm & Laurics is more than 5 million tons, production volume of CPO/PKO together just a little above 600K tons. just a little bit more than 10%). So lower palm oil price means more lower cost of goods sold for Palm & Laurics than lower profit to Wilmar in plantation. The real killer to Wimar is huge fluctuation of CPO price, whether absolute low or high CPO price does not bear much to Wilmar.

From the valued fund manager's view point - a simple business model even within the volatile agricultural sector is important.

It helps Aberdeen to focus on how much earnings that their favoured simple plantation companies can deliver via volume and price that is being fetched on the volume produced.

NOW - Noble, Olam and Wilmar have too many wheel and axles in their models. It appears to be a situation of "If you cannot convince them, confuse them".

With NOW, many need expert views (analysts) to reassure if trading the NOW stocks are warranted.

Anyway, stock market is a fair game - there are endless choices available and the beauty of which lies in the eyes of the beholders. Risks and returns is all but a game.